“The future does not belong to the globalists. The future belongs to the patriots, ”Donald Trump declared before the UN General Assembly in 2019, while, on the other side of the Atlantic, British Prime Minister Boris Johnson promoted his Brexit.
And the governments changed, but the discourse not so much.
“Our manufacturing future, our economic future, our solutions to the climate crisis, it will all be done in America,” Joe Biden said at the White House as he announced his “Made in America” commitments in 2022.
Has globalization been sentenced to death?
“Hangs the sword of Damocles, the danger of a new fragmentation of the world, of deglobalization and decoupling,” German Chancellor Olaf Scholzle told the 2023 World Economic Forum, expressing concern that the world is falling apart in political terms. and financially.
Why the fears?
Are we really at the gates of deglobalization?
Started in the 90’s
Let’s specify first what are we talking about.
Globalization is the process by which people and goods move easily across borders, according to the World Economic Forum.
Primarily, it is an economic concept: the integration of markets, trade, and investment with few barriers to slow the flow of goods and services between nations.
“The tidal wave of globalization that we have experienced began around 1990, with the end of the Cold War and the opening of China, the integration of Europe, global agreements to reduce trade barriers and the development of the InternetIan Goldin, a professor of globalization and development at the University of Oxford, explained on the BBC’s Analisys programme.
For Goldin, “while globalization is far from perfect, it needs to be improved, not destroyed“.
“People forget that globalization lifted more than a billion people out of poverty, not just in China but in other parts of the world,” said Ngozi Okonjo-Iweala, director-general of the World Trade Organization (WTO).
“Global trade lowers costs, spreads knowledge and helps economies scale through the spillover effects of technologies, which benefits emerging markets and developing countries,” he said.
The WTO assessed the impact of what could happen if the world splits into separate trading blocs. By his calculations, the consequences are significant.
“We discovered that it would cost the world a 5% loss in global GDP long-term. It’s like saying we lose Japan’s entire economy… that’s huge.
For all that, he declared: “I share the concerns about the era we are entering.”
If globalization is so good, Why are some countries now putting up barriers?
change of mind
The rising wave of protectionism is not unique to the US, but what is happening in that country is striking not only because it is still the leading superpower, but because it was the driving force behind globalization.
“Here in America, we need to take a moment to recognize that one of the key factors behind great prosperity of our nation is the policy of open trade that allows the American people to freely exchange goods and services with free people around the world,” said Ronald Reagan in 1988.
And 12 years later, Bill Clinton asserted: “ANDIt is very important for China to join the WTO to ensure that their markets are open to us, even if we have to open our markets to China, and to promote peace and stability in Asia, increasing the possibility of positive change in China.”
China’s growth overall has been immensely beneficial to American businesses and consumers. So why walk away from such a lucrative market?
“There is no doubt that the US has decided to pursue a policy to stop the growth of China. In some ways it is perfectly understandable why no #1 power has gracefully ceded its position to the rising power,” wrote Kishore Mahbubani, Singapore’s former ambassador to the UN and geopolitical consultant.
But that, if the reason, is not the only one for the apparent change of opinion.
Inequality
“Globalization was great in many ways because it lifted a lot of people out of poverty, but in almost all OECD countries saw a dramatic rise in inequality, which was most acute in the Anglo-American worldRana Foroohar, an author and commentator for the Financial Times in New York, told the BBC.
In pursuit of more profit and less cost, companies have left their hometowns, often upending lifestyles and causing massive job losses, to jump from place to place at their convenience.
That unleashed a “tax competition in the world, with countries feeling pressured by the need to cut corporate taxes particularly to attract investment,” said Minouche Shafik, President and Vice-Chancellor of the London School of Economics.
And this race to the bottom on taxes is one of the weak points of globalization because, as Goldin said, “inequality increased because governments had less money to spend.”
“Tax revenue is needed to modernize economies and invest in education, skills and infrastructure so that they can compete in a globalized world“.
A whole vicious circle.
“Ensuring that people can get to where the jobs are, with affordable housing, transportation systems and school places available, is vital to addressing the inequalities created by trade and technological change.”
The inability to distribute its benefits more equitably, along with job losses and economic stagnation, made many feel that globalization left them vulnerable and benefited only a small elite.
“That growing inequality created the politics of nationalism. which I think was largely responsible for the rise of Donald Trump in the US and at least partially responsible for Brexit, as well as for the nationalism you see in Europe and some of the problems in various other countries around the world,” according to Foroohar. .
“There is a feeling that the global market system ended up being so oblivious to the interests of the voters In democratic countries there is now a violent reaction to that system”.
For this reason, leaders of all political currents are turning their backs on globalization.
Homemade
But in addition to the desire to alleviate discontent, there are also the risks.
“National security concerns are affecting trade in certain goods,” Shafik said.
“What we are seeing now is a segmentation in whichSome markets are governed more by politics than by economics.”
A great example is high-end semiconductor chips which, as Foroohar points out, are “essentially the digital oil for the world economy”.
“92% of all those chips are made in Taiwan. That is a product of globalization: it was cheaper to make them there and very easy, as long as everything else worked”.
But given the level of tension between China and Taiwan, “now it is a problem”.
It’s a sign that it makes sense to have more than one provider and ensure that national security doesn’t depend on companies from just one country, but it’s far from the only one.
“We should be concerned about being dependent on a country like China for critical inputs, whether it’s the rare earths needed in batteries for renewable energy or solar panels,” said Zanny Minton Beddoes, editor of The Economist magazine.
“In some areas, I think there is a reason to have broader supply chains.
“What worries me is that this logic of industrial policy takes rootit spreads and it is felt that every part of the economy is strategic, that every factory in every industry has to be supported and that every country has to have all the elements of the supply chain.
“And that’s what I think we see now, with so many countries in love with industrial policy and wanting to do everything at home.”
If that is the situation in the US and Europe, how much will Asia care?
The new CIA
“The 21st century is going to be the Asian century; there will be the center of gravity of the world economy,” said geopolitical consultant Mahbubani.
“The growth engine of the world will be the new CIA, and CIA stands for China, India and ASEANthe Association of Southeast Asian Nations.
“Their combined population is 3.4 billion people.”
What is particularly surprising ishow fast has grown middle class in that region.
“In the year 2000, the middle class population was only 150 million, but by 2020 it has grown to 1.5 billion. And by 2030 it will grow to reach 3 billion.
“It will be one of the largest markets in the world. If you don’t participateyes in he, you dig your own grave“.
Since trade relations tend to be reciprocal, if the US and Europe decide to trade less with China, will Asia start to deglobalize by putting up more trade barriers?
“This will be in the largest economic ecosystem for being the largest free trade area on the planet. But we will also trade with distant countries,” Mahbubani told the BBC.
“Just to give you a concrete example: Brazilwhich is much closer to the US than to China, 20 years ago was late one year to export US$1.000 million to china; now it takes 72 hours.
“So it’s not just Asian nations that trade with each other.”
“Reglobalization”
In any case, according to the director of the WTO, there is hope for the defenders of globalization.
“Trade data for merchandise trade still do not show this fragmentation: trade between China and the US, between China and the EU, between the EU and the US is still pretty strong.
“So we are talking about geopolitical tensions,” Okonjo-Iweala said, urging: “Let’s not let them manifest in real terms”
“We are in a difficult time in the world with the vulnerabilities that we have seen in supply chains during the pandemic and this war in Ukraine, but we could take the opportunity to build resilience,” he said.
For that it would be necessarythe diversification of supply chains and the deconcentration of manufacturing to developing countries that have not had the opportunity to be included in this global wealth and job creation that took place under the first wave of globalization.
“Similarly, empowering the poor in rich countries so that they too can benefit.
“ANDthat’s what we call ‘reglobalization’ in the WTOa more inclusive globalization”.
Is it possible to do in the lean times what was not done during the fat ones?
Or will it be too late to remember the forgotten of globalization?
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